tejas.gaikwad.1044
Tejas Gaikwad
Business valuation is a processed set of procedures used to estimate the economic value of an owner’s interest in a business. Valuation is used by financial market participants to determine the price they are willing to pay or receive to perfect a sale of a business. In addition to estimating the selling price of a business, the same valuation tools are often used by business appraisers to resolve disputes related to estate and gift taxation, divorce litigation, allocate business purchase price among business assets, establish a formula for estimating the value of partners' ownership interest for buy-sell agreements, and many other business and legal purposes.
A business valuation procedure used in acquisition accounting that changes the stated values of a company's assets and liabilities to reflect its current fair market values. This accounting technique adjusts asset and liability values either up or down, so they reflect the true values on either an ongoing concern, forced liquidation or orderly liquidation basis. Also referred to as "asset accumulation method".
Both tangible and intangible assets should be included in the adjustment process, as should off-balance-sheet assets and unrecorded liabilities. The difference between the total fair market value of the adjusted assets and the total fair market value of the adjusted liabilities is the "adjusted book value" (what the business is considered to be worth).
There are many ways a business can be valued; alternatives to the adjusted net asset method include the discounting method, the capitalization method and the excess earnings method, among others.
Adjusted Net Asset Method is one of the several accounting techniques aimed at providing a fair estimate of a firm’s value. This method is generally used in case of those firms which do not have an even track record in terms of profit in the past or those undergoing liquidation or the ones which do not have any prospects of earning profits in the near future.
Also known as Asset Accumulation Method, the Adjusted Net Asset Method adjusts the book values of a firm’s assets and liabilities to arrive at their fair market value at the time of evaluation depending on whether it is an ongoing concern or a case of liquidation.
Net Assets Value = Fair market value of adjusted assets – Fair market value of adjusted liabilities.
However, in case of an ongoing concern, market value of operating assets is generally not considered based on the logic that the intention is not to sell the assets on a piece meal basis. On the other hand non-operating assets which can be disposed off without impacting the operations of the company are adjusted for their market value. The adjustment process covers all tangible and intangible assets including the ones not mentioned on the balance sheet. The adjustments further include contingent liabilities, and assets, convertible instruments, investments and surplus assets etc.
Example: In case of land and building which are not being used for company’s business, the appreciation or depreciation in the value of these assets are adjusted for the tax liability or the tax shield on such appreciation or depreciation and added/deducted from the Net Assets Value.
A business valuation procedure used in acquisition accounting that changes the stated values of a company's assets and liabilities to reflect its current fair market values. This accounting technique adjusts asset and liability values either up or down, so they reflect the true values on either an ongoing concern, forced liquidation or orderly liquidation basis. Also referred to as "asset accumulation method".
Both tangible and intangible assets should be included in the adjustment process, as should off-balance-sheet assets and unrecorded liabilities. The difference between the total fair market value of the adjusted assets and the total fair market value of the adjusted liabilities is the "adjusted book value" (what the business is considered to be worth).
There are many ways a business can be valued; alternatives to the adjusted net asset method include the discounting method, the capitalization method and the excess earnings method, among others.
Adjusted Net Asset Method is one of the several accounting techniques aimed at providing a fair estimate of a firm’s value. This method is generally used in case of those firms which do not have an even track record in terms of profit in the past or those undergoing liquidation or the ones which do not have any prospects of earning profits in the near future.
Also known as Asset Accumulation Method, the Adjusted Net Asset Method adjusts the book values of a firm’s assets and liabilities to arrive at their fair market value at the time of evaluation depending on whether it is an ongoing concern or a case of liquidation.
Net Assets Value = Fair market value of adjusted assets – Fair market value of adjusted liabilities.
However, in case of an ongoing concern, market value of operating assets is generally not considered based on the logic that the intention is not to sell the assets on a piece meal basis. On the other hand non-operating assets which can be disposed off without impacting the operations of the company are adjusted for their market value. The adjustment process covers all tangible and intangible assets including the ones not mentioned on the balance sheet. The adjustments further include contingent liabilities, and assets, convertible instruments, investments and surplus assets etc.
Example: In case of land and building which are not being used for company’s business, the appreciation or depreciation in the value of these assets are adjusted for the tax liability or the tax shield on such appreciation or depreciation and added/deducted from the Net Assets Value.